Report Title:

Income Tax Credit; General Excise Tax; Medical Information Technology

 

Description:

Provides a tax credit for the general excise taxes paid for purchases of qualifying medical information technology by physicians.  (HB232 HD1)

 


HOUSE OF REPRESENTATIVES

H.B. NO.

232

TWENTY-FOURTH LEGISLATURE, 2007

H.D. 1

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT


 

 

RELATING TO QUALIFYING MEDICAL INFORMATION TECHNOLOGY.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 


     SECTION 1.  The delivery of health care is becoming an increasingly complex process.  However, unlike other information-based industries such as banking and finance, the health care industry has been slow to adopt information technology that would facilitate the rapid and accurate transmission of vital clinical information.

     One major reason for the delay in the adoption of medical information technology is the decentralized nature of health care delivery, relying as it does on scores of physicians operating in solo or small group practices.  While decentralization in the delivery of health care has done much to preserve the traditional physician/patient relationship, which is the cornerstone of our care system, it has hampered the implementation of medical information technology that would yield great improvements in patient care and social benefits to employers, insurers, public health agencies and programs, as well as introduce efficiencies to the health care delivery system as a whole.

     Most of the benefits of medical information technology will accrue to society as a whole in the form of increased efficiency of delivery and lower administrative costs (and therefore lower costs to insurers and lower premiums to employers and employees).  It will also reduce medical errors and provide a higher quality of care to consumers.  Nevertheless, medical information technology is expensive, and the cost of implementation falls primarily, almost exclusively, on physicians, many of whom are small businessmen and businesswomen, coping with educational debt, the rising cost of medical malpractice coverage, and shrinking cost reimbursement.

     To encourage physicians to invest in medical information technology in their practices, the State should provide, in the form of an income tax credit, a limited rebate of the general excise tax on physician services to those physicians who are willing to invest their time, effort, and money in this technology.  This modest self-limiting rebate will yield great dividends to the people of Hawaii both immediately and over time.  It will facilitate the rapid and accurate transmission of information vital to the health of Hawaii's citizens, facilitate coordination of care, reduce the number of medical errors, reduce administrative overhead, reduce the need for duplicative testing, provide for accurate and timely billing and payments, and create highly skilled and well paying jobs in medical information technology in Hawaii.

     SECTION 2.  Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§235-    Medical information technology tax credit.  (a)  There shall be allowed a nonrefundable medical information tax credit to each eligible taxpayer who is not claimed or is not otherwise eligible to be claimed as a dependent by another taxpayer for federal or Hawaii state individual income tax purposes and who files an income tax return for the taxable year that a tax credit is claimed under this section.

     (b)  The tax credit shall be equal to the amount of general excise tax imposed on expenditures up to $20,000 of qualifying medical information technology costs that are passed on to an eligible taxpayer; provided that any excess of that limit in any taxable year may be carried over to subsequent tax years until exhausted; and provided further that no refunds or payments on account of the tax credit allowed by this section shall be made for amounts less than $1.

     (c)  An eligible taxpayer shall certify to the department that the taxpayer is in compliance with all applicable federal, state, and county statutes, rules, and regulations.

     (d)  Every claim, including amended claims, for the tax credit under this section shall be filed on or before the end of the twelfth month following the close of the taxable year for which the tax credit may be claimed.  Failure to meet the filing requirements of this subsection shall constitute a waiver of the right to claim the tax credit.

     (e)  As used in this section:

     "Eligible taxpayer" means a person who:

     (1)  Is licensed to practice medicine under chapter 453 or 460;

     (2)  Has at least $500 in qualifying medical information technology costs in the taxable year in which the tax credit is claimed; and

     (3)  Certifies to the department that the qualifying medical information technology that is the object of the tax credit under this section will be used in conjunction with the taxpayer's practice of medicine as that term is defined in section 453-1.

     "Qualifying medical information technology costs" means amounts paid for the purchase, lease, or licensing of computer hardware, software, or Internet access used in connection with the practice of medicine as defined in section 453-1, or the practice of osteopathy as defined in section 460-1.3, including training costs for physicians or staff, but shall not include amounts paid to third-party claims processing or billing services.

     (f)  The director of taxation:

     (1)  Shall prepare such forms as may be necessary to claim a tax credit under this section;

     (2)  May require proof of the claim for the tax credit; and

     (3)  May adopt rules pursuant to chapter 91 to effectuate the purposes of this section.

     (g)  The department shall report to the legislature annually, no later than twenty days prior to the convening of every regular session, on the number of taxpayers claiming the tax credit and the total cost of the tax credit to the State during the past year."

     SECTION 3.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 2007, and apply to qualifying medical information technology costs incurred on or after January 1, 2008.